The Allowance for Doubtful Accounts

question 115

Multiple Choice

The Allowance for Doubtful Accounts:

• A) Is a contra asset account.
• B) Is used instead of reducing accounts receivable directly.
• C) Is debited when uncollectible accounts are written off.
• D) All of these.
• E) Is credited when bad debts expense is estimated and recorded.

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Definitions:

Indirect Method

A financial reporting approach used to generate a statement of cash flows by adjusting net income for changes in non-cash account balances.

Declared

Often refers to the official announcement by a company's board of directors of a dividend or other corporate action.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use.

Original Cost

The initial monetary value of an asset, including the purchase price and any related acquisition costs, but before depreciation or amortization.